Douglas Lake Cattle Company Ltd. vs. British Columbia

by Mary MacGregor

(written 1990 published Beef in B.C. Sept/Oct 1990 minor amends 2002)

Throughout the spring and summer of 1990, Douglas Lake Cattle Company (“Douglas Lake”) has pursued a lawsuit against the provincial government. The lawsuit is about the nature and extent of the rights that Douglas Lake has by way of its grazing licence.

There has been generally held belief in the ranching industry that a grazing licence gives the rancher no interest in land but only a right to harvest forage, and provides little or no control over the licence area. This belief has been held in the absence of any B.C. court decision about the extent of rights granted under a grazing licence. If a final decision is reached in the Douglas Lake case, it will be significant for all grazing licence holders.

It appears however that the implications of this claim have so alarmed the provincial government that it passed rush legislation to amend the Range Act (B.C.). This legislation – the Range Amendment Act (B.C.), 1990 (Bill 74) – was passed only July 24, 1990. It was proposed and passed at the insistence of the Attorney-General. The legislation was proclaimed on August 10, 1990, with retroactive effect. It completely changes the compensation provisions of the RRange Act. I will return to its contents after reviewing the Douglas Lake case.

The story started with the construction of the Coquihalla Highway Phase 3 (Okanagan Connector) which passes through 40 km of Douglas Lake’s deeded land and grazing licence. The Ministry of Transportation and Highways (“the Ministry”) expropriated land for the highway itself, including about 1,050 acres of grazing licence. Douglas Lake is NOT arguing about the land which has been expropriated. It is arguing about some 1,800 acres outside the highway corridor which the Ministry has not expropriated but which it is using during construction. the areas of use include gravel pits and stockpiles, construction crew campsites, waste material disposals and the road accesses to these various areas. When no longer required, these areas are to be reclaimed including reseeding.

As these areas were not expropriated by the provincial government, the Ministry offered no compensation for their use. They were not deleted from Douglas Lake’s grazing licence, so the compensation provisions of the Range Act are irrelevant. The only avenue open to Douglas Lake to obtain compensation seemed to be a trespass action. If successful, Douglas Lake would be entitled to damages for trespass. The question is: does a grazing licence give enough of an interest in land to the licence holder to support a trespass claim?

Douglas Lake started a lawsuit against the provincial government claiming that the uses were a trespass. On May 16, 1990 the ranch applied to a judge in Kamloops to have him declare that the uses constitute a trespass and restrain the Ministry form entering Douglas Lake’s grazing lands.

Douglas Lake’s grazing licence has the following usual provision:

“The Licensor [Ministry of Forests] reserves the right to use, or to grant to others the use of the licence area for any purpose other than grazing that the Licensor, after consulting with the Licensee [Douglas Lake], considers is compatible with grazing.”

As well, before its July amendment, the Range Act provided in section 21 that “a licence or permit does not preclude the Crown from using, or from granting to others the use of, Crown range for a purpose other than grazing or hay production that the regional manager considers is compatible with grazing or hay production”

To succeed in a trespass action one has to show a right to exclusive possession. This was a key element in the case. There were a number of technical arguments to say that under the Expropriation Act (B.C.), the Land Act (B.C.) and previously decided cases about similar types of tenures, the interest given by a grazing licence gives sufficient exclusive possession to support a trespass action.

There was conflicting information at the court application as to the compatibility of grazing and the Ministry use of the areas, and whether or not appropriate consultation had taken place.

In a judgment issued June 1st, Supreme Court Justice Ken Houghton dismissed the application to restrain the Ministry from entering the lands. He said that the whole issue is what compensation ought to be paid for the Crown’s activities in the areas in question, and that no restraining order ought to be granted because damages would adequately satisfy Douglas Lake. He said that the Crown had the right under a number of statutes to take the land or use it in the way that the Ministry had, and he cited the Highway Act (B.C.), the Ministry of Transportation and Highways Act (B.C.), the Land Act and the Forest Act (B.C.). He decided that the grazing licence is for a quantity of forage only and does not provide exclusive possession of the area, and that the Crown is not a trespasser where the Regional Manager of Forests is of the opinion that the other uses being made are compatible with grazing.

Douglas Lake has appealed to the British Columbia Court of Appeal. Until the appeal is heard some time from now, the lawsuit is on “hold”.

On appeal, Douglas Lake will argue that although there are statues which authorize the Ministry to take over the areas, none of those statutes has been invoked. In addition, Douglas Lake says that the judge did not accurately find the true nature of a grazing licence. The ranch says that a grazing licence is a “profit-a-prendre” (the legal name for a right to remove a product of land, most commonly timber or gravel) and that previous cases have decided that a profit-a-prendre gives an interest in land of sufficient extent to support a trespass action. Finally Douglas Lake says that the Forests Regional Manager’s decision about the compatibility of grazing with the Ministry of Highways uses was not made at the appropriate time, and in any even was clearly wrong.

Following closely on the heels of Douglas Lake’s court application and decision came the Range Amendment Act (B.C.), 1990 (Bill 74). It changes a number of Range Act provisions including the previous compensation provisions. Before reviewing the changes, a summary of the previous provisions may be helpful. The Act originally include section 21 quoted above, and also gave the Minister the ability to delete an area from a licence and reduce the AUMs after giving notice, where the Minister considered the land to be required for a use incompatible with grazing. When more than 5% of the AUMs were deleted, “the Crown [was to] compensate the holder of the licence…with respect only to the portion of the loss of production below 95% or the unexpired portion of the term of the licence or permit”. The rancher was to be compensated for any improvements which had been made with the consent of the regional or district manager and which were not paid for by the Crown.

These provisions were planned in consultation with the B.C. Cattlemen’s Association Land Use Committee when the grazing licence provisions were originally legislated. The object was to have greater security of tenure than was offered by a one or five year permit, and to give the licence holder more management responsibility and control. The Committee believed that it had negotiated a fair arrangement when the government agreed to compensate a licence holder for the full value of lost production exceeding 5% of the original AUMs over the remainder of the licence term, provided that more than 5% of the licenced AUMs were deleted for another use.

The amending legislation completely repeals the compensation provisions in sections 21, 22, 23 and 24. The substituted provisions are discussed below. First, it brings back section 21 and adds a provision that a licence (whenever created) is not an interest in land but only an interest in a quantity of forage. It says the government will not pay compensation where the Regional Manager authorizes any other use of the area which he considers compatible with grazing, nor will it pay compensation for passing the amendment. (Without this last provision the amendment itself would deemed to be an expropriation of a property right for which compensation is normally required.)

A new section 21.1 is inserted into the Act. This section says that regardless of any other legislation or contract rights granted under the existing or previous Range Act, the government will pay no compensation of any kind nor can anyone claim damages or a restraining order for a loss caused by the government using or allowing others to use a grazing licence or permit area for a number of listed reasons. The listed reasons include:

a public work including highway and areas used for access or construction of the highway (the described areas are virtually identical to those of which Douglas Lake complained)

a mine

a gravel pit or stockpile site

timber harvesting

campsites

access to any of the above

the sale or other disposition of the land by the government for any purpose.

The amendment goes on to say that these provisions apply whenever the loss arose, either before or after enactment of the amendment, including a loss now being considered by the courts.

[Note that “timber harvesting” is a use for which the rancher is not allowed to claim damages or losses. Whether the Ministry of Forests intended to do so or not, this provision may completely end any chance of compensation from the government for any timber-range interaction problems.]

New section 22 says that the Minister can change the boundaries of the licence or permit area and reduce the AUMs where he believes that the change will lead to more efficient resource use, or the land deleted is required for an incompatible use. He must give 60 days notice of a deletion where the AUMs are not reduced, and one year’s notice where the AUMs are reduced.

Next, section 23 changes the compensation provisions. Compensation is offered for (1) a reduction in AUMs over 5%, and (2) lost improvements. Compensation for a reduction is to be equal to “R” divided by “Q” times “F”.

“R” is “that portion of the reduction in the total number of AUMs…obtainable from Crown range to which the holder of the licence or permit would be entitled over the term of the licence or permit if there were no reduction, that is caused by the deletion and that, when taken together with all reductions made under section 22 during the term of the licence or permit, exceeds 5% of the total number of AUMs…referred to above”.

“Q” is the total number of AUMs which the licence holder would have enjoyed over the term of the licence had there been no reduction.

“F” is the total fee that would have been paid over the full term of the licence had there been no reduction, based on the average annual fee paid per AUM up to the time of the reduction.

Thus compensation is equal to the reduction in range fees over the remainder of the licence term.

The compensation provision for improvements on range is a substantial change from the previous legislation where the cost of improvements was fully compensated. In the amendment, the improvement must have been made with the consent of the district manager in order to be compensable. The compensation for lost improvements is equal to “N’ divided by “L” times “C”.

“N” is the number of years remaining in the licence or permit after the deletion; “L” is the life expectancy of the improvement when it was made, and “C” is the cost of the improvement to the licence holder when it was made. For example if you constructed four miles of fence at a cost to you of $16,000 with a life expectancy of 25 years, and you have two years remaining on your licence or permit, your compensation will be 2/25 x $16,000, or $1,280. If the improvement was recently constructed, this is not a good deal.

The amending legislation goes on to validate any licences or permits issued between January 1, 1988 and date the legislation is proclaimed. These licences or permits may have been invalid because they were not entered into exactly according to the Range Act.

Last the amendment says that new sections 21.1 and the validation section operate retroactively on proclamation, which was August 10, 1990.

The legislation is obviously aimed directly at the Douglas Lake claim. The government must have believed that it presented a significant problem or else it would not have enacted the legislation.